Gold For Delivery Please!

"The extent of corruption in Europe is 'breathtaking' and it costs the EU economy at least 120bn Euros, annually the European commission says."

There you have it. This statement comes directly from the European commission in a recently published report, almost certainly an incompetent bureaucratic nightmare itself , I'll give credit to them for even publishing this...but it doesn't go nearly far enough.

The real cost of corruption runs to multiples of what the European commission suggests. Why?

Because what is not included in this report is the corruption that exists with the revolving door between Government and bankers who have sucked trillions of dollars out of the world economy, and who continue to drive respective countries bankrupt, rape and pillage the man on the street and tell him it's for his own good.

The corruption not mentioned in this report is that of the big banks gaming the stock market. They do this via their proprietary trading desks front running their clients. They do it by packaging up garbage mortgages and bribing the rating agencies to look the other way, rubber stamp said garbage and then flog it to the masses.

Then there is the blatant manipulation of interest rates, juicing the stock and bond markets. Yes this is a corrupt world. Thinking otherwise is like arguing that gravity doesn't exist. The question isn't whether manipulation is taking place, or whether the stinking pile of sinister, corrupt lunatics that are our "masters" should be fed to the nearest flesh-eating creature available. We, humble yet unapologetic market participants, can still choose how we interact in the market place.

On that note, today I present to you some interesting facts which I've nicked from a recent Trade Alert we sent to our subscribers. If you have yet to opt-in to this currently complimentary service, you can do so HERE, and get a copy of that alert immediately. We think it's well worth the price... Oh, wait, it's FREE.

Meanwhile, here's the thesis we used to create it...

The first is a graph showing the expiring month of gold traded vs the next deliverable month for nearly 4 years.

The traders amongst you will find the pattern here interesting. This is called an "inverted" situation, where gold for delivery in the front months trades at a premium to the back months. It is an unusual situation since there are costs associated with holding inventory. Unless the market participants believe there is an impending supply coming into the market you don't usually see this setup.

The answer may well lie in something which Kyle Bass touched on in this interview at the AmeriCatalyst conference. He explains succinctly why he advised the University of Texas to take delivery of $1B in gold from the COMEX.

Here's a snippet of his conversation with the head of deliverables at the COMEX:

Kyle Bass: What if 4% of the people want delivery?

Comex: Oh Kyle that never happens, we rarely get a 1% delivery.

Kyle Bass: Well what if it does happen?

Comex: Price will solve everything

Kyle Bass: OK, give me the gold

Now I'd like to show you another chart which is excerpted from the fullTrade Alert

This is a graphical representation of the amount of gold in Registered Comex inventory. What is evident from this chart is that the amount of physical gold inventory at the Comex is going down. According to the latest numbers registered inventories are now at just 402,000 ounces.

At $1,200 per ounce this represents $504 Million in available gold for delivery.

We feel there is a trading opportunity where shorts make sure they've gotten out before settlement arrives. This has been happening for 4 years at least. All well and good. Traders take notice.

For long term investors the evidence is clear. TAKE DELIVERY, you'll be no worse of for doing so. If this eventuates in a short squeeze paper holders will be left holding...well, paper. Running the math here, if just one small player in the gold trading game got nervous and like Kyle Bass, demanded delivery of a position limit size (equal to 3,000 contracts or 300,000 ounces), the Comex would empty fully 71.9% of its deliverable supply. But don't worry, price will solve everything! Really?

The actual trade which our own Brad Thomas presented in the Alert is a gold miner. The company he is targeting has enjoyed a spectacular 76% collapse from its highs. The entire trade is too long to post here, so again, if you aren't already getting our Trade Alerts go and sign up HERE and get all the sordid details.

Meanwhile, I'm reminded of some other soothing facts our friend Mark Schumacher from ThinkGrowth.com recently shared with us, and deserve repeating, when contemplating buying a stock that has done nothing but go down:

Average 3-year nominal returns when buying a down sector (since 1920s):

Down Avg. Annual Return

60% = 57%

70% = 87%

80% = 172%

90% = 240%

Average 3-year nominal returns when buying a down industry (since 1920s):

Down Avg. Annual Return

60% = 71%

70% = 96%

80% = 136%

90% = 115%

Average 3-year nominal returns when buying a down country (since the 1970s):

Down Avg. Annual Return

60% = 107%

70% = 116%

80% = 118%

90% = 156%

I'll leave you with those figures and facts. Choose to do with it what you will. If you wish to get Brad's alerts complimentary for a limited time you can still do so HERE.

- Chris

"Develop your own opinion. Go look at these numbers. Don't listen to me... The key is to do your own work." - Kyle Bass

Comment viewing options

Silver; more profit potential. less interesting, by orders of magnitude, to the authorities. Why do you keep talking about Gold? You have a choice between two monetary metals; neither of which can be "printed"; and have equally long genetic race memories in all of humanity. why not choose the one that minimizes your conflict and confrontation with government authority, and maximises your profit?

I could not agree more. Silver is not generally subjected to confiscation because of its usefulness and need in manufacturing. pre 65 silver coins (ie dimes) are more easily understood by the non-educated/un-informed. My choice of pm is 98% silver based. This is likely the last great window of opportunity to load up on silver.

M'thinks you missed the Blythe Masters story. There will be no run on any Comex, and there will be no adjustment of Comex pricing or policies. As a matter of fact, Blythe right at this very instant has half-a-dozen MIT math nerds locked away somewhere working out the Next Great Complex Financial instrument that is going to bridge the gap between $500 paper gold and $2000 physical, permitting our present version of the Matrix to continue on with nary a hiccup.

My CIs tell me that, though obscure, the algorithms being crafter to achieve this miraculous feat are modeled on the intestinal processes of diarrheatic chimps. Whatever the outcome, these spectacularly complex works of mathematical brilliance will be the marvel of modern finance and highly sought after by wing-tipped Brooks Brothers types.

The rest of us will settle for physical gold at $2000 an ounce and be made to feel like we're paying a fortune for dog droppings.

this, if true, suggests that jpm is allowing china to buy the physical gold cheap, while it buys the phyz silver cheap, and then when china launches it gold or partial gold backed currency option, jpm's silver will not just ride on the coat tails of gold but propel far beyond it.

it very nimbly explains why one of the old money behemoths would otherwise be 'so stupid' as to deplete its gold stocks

fantastic play

and in the meantime goldman sachs has sneakily acquired phyz gold

think about it this way - the comex inventory left is only the equivalent price of about 2000 suburban houses. So, so ready to pop

OK, so on the day COMEX reveals that it's bankrupt and won't make good its gold contracts, suddenly there's a whole lot of paper that has lost most of its value. What bets have been made on this outcome? Who will be yjr winners and who'll be wiped out and fold?

Then what bets have been made on *that*? Does this shock die down? Or is the whole pile of fiction so unstable that it feeds on itself and grows? And if the latter, does this shock take down the whole derivatives market with itself? And how will *that* feed back into the "real economy",

I understand this well enough to be able to throw around some terrifying big numbers and say "huge! unimaginable", and "turrible; bluddy awful", but up close I couldn't tell you the mechanics of this unravelling.

Could someone with a good imagination and strong gaming skills, who has steeped themselves in this reality for some years and have a try at imagining play by play how it will all unravel, in what sequence and at what pace?

You know, the same is true of dollars. I forget the numbers but only a tiny fraction of dollars physically exist in paper form. Convince the people (world) they need to hold maximum cash dollars and things could get interesting. Hmmm. Wonder what the Feb 15 stuff is all about.

"Then there is the blatant manipulation of interest rates, juicing the stock and bond markets. Yes this is a corrupt world. Thinking otherwise is like arguing that gravity doesn't exist. The question isn't whether manipulation is taking place, or whether the stinking pile of sinister, corrupt lunatics that are our "masters" should be fed to the nearest flesh-eating creature available. We, humble yet unapologetic market participants, can still choose how we interact in the market place."

'Prosecute', or be a/the very part of the problem, even as a humble participant.

OK, I have a serious question. It is my understanding that if the COMEX inventories were to approach zero and someone asks for a delivery amount that cannot be met, the COMEX would declare a Force Majeure. (I'm including a definition, not because I presuppose nobody knows what it means, but as a way of asking how it would be put into effect.)

[French, A superior or irresistible power.] An event that is a result of the elements of nature, as opposed to one caused by human behavior.

The term force majeure relates to the law of insurance and is frequently used in construction contracts to protect the parties in the event that a segment of the contract cannot be performed due to causes that are outside the control of the parties, such as natural disasters, that could not be evaded through the exercise of due care.

In this case, it is 100% clear that default would not be an act of nature, but due to human behavior, i.e. criminal negligence and theft. However, when a force majeure is declared, what exactly would happen? I doubt price would accommodate for the problem, because people at JP Morgan and Goldman will give the general public a big F.U. when they are told that the last hold out is willing to take $20,000 per ounce instead of gold.

My guess is that the COMEX will simply declare all contracts null and void and require, at best, payments be made to holders of long positions in the amount equal to the price before it started heading exponentially northward.

Am I wrong? Does anyone thing that a) someone would be forced to find and deliver the gold or b) that banks would be forced to pay 5X, 10X or 100X the current price to clear their short positions? In the first case, it seems even the German government cannot force the US to return gold that they physically deposited in the United States. In the later, (and this is just an example), I see these scumbag companies spinning off a Goldman Gold Holdings, LLC with all their bad debt and let it go bankrupt. Or, some variation on this them will transpire. Any thoughts? Am I nuts? If so, how?

I'm not saying I'm right, but my honest opinion is that in case of default, all holders of long positions would be lucky to get $1,300 for each oz. outstanding. They might get nothing but the right to come smell, touch and see an empty gold vault. For sure, they won't get an apology from anyone and Obama's next State of the Union address will state that he's the first leader of the free world ever able to make their country free of any gold and a pure fiat nation. 95% of the country will applaud him, thinking the 1%ers got screwed and that they are better off for the collapse.

Maybe I'm just a pessimist who thinks the president is the embodiment of pure evil.

DVFCO, not a pessimist at all. A pessimist would say if you ask for your gold they will toss you a** in jail. And your correct, the average mope will think the President (whoever he is) is doing the right thing.

Thanks FMR Bankster. But, keep in mind, I'm only a pessimist because I'm a realist. I am 100% sure we're all fucked in the relatively near term. While I like to 'stack' (no, not that thing we used to do in the dorm rooms, which excluded flushing in between bathroom uses), I wonder how gold and silver will be used as a medium of exchange when only a small percentage of people own them in any considerable amount. With whom will one trade? It will have to revert to barter for some time. To that end, here's my list of great investments for right after the crash:

A crate (not a carton, a crate) of cigarettes would be a hell of a hedge against the crash. Just think what you'll be able to get for a pack of Luckies when people are broker. Sure, I'll take you pistol in exchange for a carton, uh, make that 8 packs. OK, go kill yourself. Good luck.

#2 on my list is a huge-ass bag of Cubic Zirconium Diamond Rings. How many people could be tricked into taking 'the ring my wife doesn't even know I took from the house before she woke up' in exchange for just about anything? I think the fake wedding ring gag could last for a month or two, before someone starts chasing me with a bat.

#3 - I'm thinking of the #2 oil tank in my office building (400 gallons) for use in a diesel car, and converting the building to gas. I could sell that shit like crazy, take the write off as a business expense (it's an old building - we burn a lot of oil!) and make sure I always have gas for my family. (#2 oil and diesel fuel are one-and-the-same, except for one having a tiny bit of pink die, so the gov't can tax the shit out of the stuff we put in our cars.)

There are a bunch of other little things people will be desperate for in the time while we move from barter to trading Middle Eastern or Chinese gold-backed currencies. Any ideas?

Well including the definition is appropriate as the author of the thesis proposed this:

Government corruption. Tautology.

and actually Government and corruption in the same phrase is actually a REDUNDANCY rather than a Tautology.

Now a Tautology is a logical statement which declares a if a condition happens then another condition follows. (If A then A)

While if there is a Government then there is Corruption is a tautalogical premise (and VALID) it does now follow that the phrase "Government corruption" is a Tautology.

It is, however, just a redundancy.

So as to your question. I really do not care if the paper holders get screwed. If they get screwed because they were not holding Physical Gold then that is their stupidity for trusting FRAUDULENT ASSETS.

Other price discovery methods will emerge rapidily upon the Comex declaring a Fraudulent Force Majeure.

If you are involved in a Fraudulent Market then you deserve to be BURNED by the Fraudulent Market. Ignorance is NOT AN EXCUSE. An investor needs to exercise DUE DILLIGENCE in researching ANY MARKET with which he is to become invoilved.

I want the speculator to get burned the worst as they have screwed up any true market valuations.

I believe the tons are there. Yes there are more claims than there is physical. THAT is the issue. The only thing that maters is can the system deliver physical when important entities say they want it.

As long as 98% of gold traders are happy to get dollars out of the process everything will run smoothly. As long as the system can demand that individuals take dollars instead of gold, everything is OK.

The system will only collapse when very important entities (the world's major producers like oil and China) cannot get gold for their production when they demand it. A Comex collapse willl not likely upset them too much. That would just be little folks getting screwed. BUT the big guys cannot be messed with or oil might not flow or products might not arrive.

The message we should all take away is that there is no way we can know when the system will fail. Pretending that a Comex failure will signal the end is dangerous. GET YOUR GOLD NOW. Don't wait until you think it is the last minute. Don't think you can make that one last trade and then ask for physical.

This appears to be level headed describing corruption which needs to be addressed first

Lets not put the cart before the Trojan year of the horse

In view of the video, any amateur economist like myself can have necessary material to prove that it is totally useless to carry on about gold and real money when the entire financial accounting system and what it is based upon is crime of all crimes and needs to be addressed before wiseacring about other issues.

The question of the gold, is about legal advice and the best way to prosecute the corrupt system of banking.

I would like to see more gold experts here addressing the criminal aspect of what has happened to gold, if that is at all possible during gold hysteria.

A footnote to the recent video by Karen Hudes and guest professor Antal Fekete

"Karen Hudes studied law at Yale Law School (J.D.) and economics at the University of Amsterdam (M.Phil). She worked as a corporate and securities lawyer at a major New York law firm and for several years at the Export Import Bank of the US, before she became a senior counsel in the legal department of the World Bank (1986 – 2007). Her personal web site can be found here: http://www.kahudes.net."

Published on Feb 3, 2014

Professor Antal Fekete discusses the "red alert" for collapse of fiat currency - gold backwardation as measured on spot and futures markets, an end of bullion leasing in July 2013, disappearing gold from the Comex market. A power transition model, with 95% accuracy, predicts that gold in the global collateral account, "cloaked in secrecy" is coming out of hiding for its legal beneficiaries--humanity."

They are both great, and the video is interesting. However, why are two such intelligent, educated, powerful people doing a interview outside an airport with a $20 video camera? If it were than important, couldn't they find a quiet corner in the airport, and stop in a shop and buy a $50 camera? It's rough to watch. Those docs are also just incredibly bizarre.

I like Kyle Bass; he doesn't care for BS. Back to basics; always a good idea. The Comex does buy in Gold, of course, from producers; but they are getting a little low on inventory. What if a couple of wealthy European Families get together and just buy all of it? That would be interesting.

you've got to follow that Canadian dollar very closely (and AUD...and obviously ALL of Latin America.)

The cartel is...mostly...banking.
This gives the appearance of limiting supply...waves a red flag in front of speculators...creates all sorts of "things that if i were actually thinking i would never have done" kinda stuff.

And that's how a market is "made." (by bidding a price higher.)
Simply say the word "gold!"...and by definition folks will demand delivery "and since there are always questions of delivery" by definition the price should always move higher.

the question therefore becomes "what if all the mines shut down and you're still getting delivery?"

"and since there are always questions of delivery" by definition the price should always move higher.

the question therefore becomes "what if all the mines shut down and you're still getting delivery?"

And so in my observation, the gold buyers of last resort are the central banks.

After a humungous feed, the central banks leave some crumbs behind to fool the dazzled/blinded gold bug that has been blinded by the intense light of QE into thinking gold/silver is scarce somehow. Without this illusion/trick, the central banks own gold would crash in value, unless they sold back and forth to each other to create further illusions.

SAT 800 appears to think somehow, rich European families will somehow create a Tsunami of demand that will cause an effect similar to the volume buying of central banks. Which family? Just one example of a family that is not central bank/bank related would have helped readers like mysef understand a little better what it was that SAT 800 and the like meant.

Hmm.... All i can do is put my economic climate psychiatrist (Hobby) hat on and invite other gold bugs to my couch. There is no charge, and the service is purely for fun, and to make this very serious subject a little more light hearted.

As for the rich european families, SAT 800 must mean those who were previously rich.

SAT 800 Fri 02 /07 / 2014 - 03 : 16 4410894I merely replied with a question to your question. it was not a statement, or an observation."What if a couple of wealthy European Families get together and just buy all of it?"If you meant families of central banks, your question would still not make sense, since more than a couple European central bank families are allready buying vast quantities of gold to pump the price up and keep it high in an environment of bankruptcy, austerity and so on.Thanks.